Section 998: Fourth District, Division 3 Has A Very Precedential Decision On Pre/Post-Offer Costs Calculus Under 998 Offers

Court Itself Calls For Legislature To Clarify How The Pre/Post-Offer Mechanism Operates—Likely, A Good Thing, If It Happens!

            Our local Santa Ana Court of Appeal, in a very thoughtful opinion authored by Justice Ikola, has taken on a vexing issue—how pre-offer/post-offer fees/costs get allocated in CCP § 998 offers for purposes of future proceedings after a jury verdict comes out with a result in a 998 offer silent on fees and costs. The close to ending paragraph may summarize it all, “Having reached this disposition, we nonetheless believe the bench and bar would be well served if the Legislature amended section 998 to clarify how costs and fees should be addressed in a 998 offer.” Pay attention, lawyers and legislators—this observation has merit given some of the prolix law in the 998 area. Now to the specifics of this particular opinion.

           In Martinez v. Eatlite One, Inc., Case No. G055096 (4^th Dist., Div. 3 Oct. 3, 2018) (published), plaintiff sued defendant for employment discrimination and other claims, with a jury awarding her $11,490 in damages. Earlier, defendant made a 998 offer in the amount of $12,001, which was silent on how fees and costs would be allocated before the jury verdict and with plaintiff never responding to the offer. Dueling costs motions transpired, and plaintiff filed a motion for attorney’s fees. The lower court awarded plaintiff a little over $4,000 in costs and $60,000 in pre- and post-offer fees to plaintiff. In getting to this result, the lower court added plaintiff’s pre-offer fees and costs to the jury’s award and compared the total to the $12,001 offer, which easily showed an outstripping of the 998 offer given that the offer was silent as to fees and costs.

            Not so fast, said the 4/3 DCA panel.

            The problem here, according to the reviewing court, was that the lower court should have done parity—comparing the jury’s award plus plaintiff’s pre-offer fees/costs with the amount of the 998 offer plus plaintiff’s pre-offer costs/fees for purposes of determining whether the jury award was a “more favorable judgment.” When this math was done, plaintiff did not obtain a more favorable judgment, such that the lower court on remand had to award only pre-offer fees/costs to plaintiff, post-offer costs to defendant, and any expert witness fees the court determines to discretionarily award to defendant.

            We bet this decision will get a lot of attention, but let’s see what happens!